Doug Cornelius on compliance for private equity real estate
Frost Management Company was what seems like a typical venture capital fund complex that had raised five private funds and invested the capital in a portfolio of start-up companies. The SEC says it found undisclosed affiliate payments and brought a suit against Frost. Frost was an “exempt reporting adviser” with a filing from 2017. It … Read more »
Last week, the SEC’s office of Compliance Inspections and Examinations released a risk alert on Most Frequent Advisory Fee and Expense Compliance Issues Identified in Examinations of Investment Advisers. It was a bit shocking. Shocking mostly because the issues are mostly mechanical procedural errors that were contrary to the investment advisory agreement: Using a different … Read more »
Private Fund CCOs have been focused on the disclosure and reporting of fund expenses for years. The Securities and Exchange Commission made it a centerpiece of exams of private fund managers. A handful of cases came out in 2015-2016 on that first wave of private equity fund manager exams: Blackstone failed to fully inform investors … Read more »
Expenses charged by private equity managers to their portfolio companies and their funds has been on the SEC’s radar since Dodd-Frank. Apollo Management was one of those caught with improper fee calculations last year. One item mentioned was the inappropriate expenses charged to the funds by one of its partners. We got more detail on … Read more »
The Securities and Exchange Commission has been looking at fees and expenses at private equity funds for several years. Two years ago it brought a case against Kohlberg Kravis Roberts & Co. for misallocating more than $17 million in “broken deal” expenses to its private equity funds. An SEC investigation found that from 2006 to 2011, KKR … Read more »
For years, the Securities and Exchange Commission has been focused on fees and expenses allocated by a private fund managers to their sponsored funds. The latest to be caught improperly allocating fees and expenses is Potomac Asset Management. First, Potomac improperly charged $2.2 million in fees to the fund for services provided by Potomac to … Read more »
California’s soon to be enacted new law, AB 2833, requires every California public investment fund to require its alternative investment vehicle fund managers to make disclosures regarding fees and expenses. AB 2833 mandates that that every California public investment fund (that includes CalSTRS and CalPERS) must make the following disclosures at least annually: The fees and … Read more »
Apollo has been variously recognized as a god of sun, truth, healing, and poetry, and more in classical Greek and Roman mythology. It’s namesake private equity firm has settled charges with the Securities and Exchange Commission that it was less than truthful in disclosing fees charged to investors. The main thrust of the Apollo case … Read more »
In house lawyers fall into two sections of typical fund documents. On one had, fund documents usually state that the fund pays for legal expenses. Another section states that the general partner is responsible for employee expenses. Can you charge in-house legal staff as a fund expense? It depends. This was mentioned by Marc Wyatt, Deputy … Read more »
Fee structure is a guiding force for how fund managers operate and a keystone for compliance professionals. A compliance professional needs to focus on ways that a fee structure could cause the fund manager to act to the detriment of fund investors. The Securities and Exchange Commission just charged a fund manager for using distorted … Read more »